Mergers and acquisitions (M&A) activity among insurance carriers in the first half of 2024 reached its lowest level in 15 years for first-half figures, with just 103 deals completed, marking a 40% drop from the 171 transactions seen in the same period in 2023, according to a Clyde & Co report.
The significant slowdown has continued a trend from 2023, driven by inflation, interest rate hikes, and rising integration costs. The first half of this year set a new low in H1 activity – the previous record being 162 deals in the first half of 2013.
Despite six billion-dollar deals being closed – three in the US, two in Asia, and one in Europe – overall transaction numbers have dipped sharply, with cross-border transactions mostly concentrated in Europe, the Middle East, and Asia.
Clyde & Co noted that cash-rich carriers have held back from deal-making in 2024, choosing instead to retain capital amid high interest rates. High seller pricing expectations and the increasing costs of integrating new technologies have further slowed activity.
With innovation widening the gap between outdated systems and modern platforms, tech integration has become a critical, expensive aspect of M&A deals. Talent acquisition is also playing a larger role in deal negotiations.
However, Clyde & Co’s report suggests that the worst may be over, as conditions for a potential recovery are beginning to align.
“Insurance M&A, for the remainder of 2024 and into 2025, will likely be driven by larger scale transactions,” Clyde & Co partner Eva-Maria Barbosa (pictured) said.
“While the total number may not increase dramatically, we are increasingly likely to see deals that span a number of jurisdictions with some of the major carriers now looking to take on books or businesses which span eight to 10 countries in one swoop.”
Fellow partner Peter Hodgins pointed out that the US election later this year could help settle political uncertainties, potentially fueling more deal activity.
Region-wise, the UK has seen little M&A activity so far in 2024, though there is growing speculation that larger deals may pick up. UK-listed insurers are particularly seen as attractive targets due to their solid performance and lower valuations. Smaller bolt-on deals and niche acquisitions should be expected in the near term.
Europe has been impacted by the same factors stifling global insurance deals, but an improving economic outlook and political clarity may boost multi-country deals, especially with the implementation of the European Union mobility directive.
With 40 completed transactions, the US and Canada led the world in M&A activity for the first half of the year. Brookfield Reinsurance’s $3.6 billion purchase of American Equity Investment Life was the largest deal globally, and the US also saw multiple billion-dollar sales. Despite this, overall activity remains lower than typical for North America.
The Middle East continued to experience consolidation, with five transactions closing. Regional carriers are strengthening their positions to take advantage of local growth opportunities. While some global players have scaled back, specialty international insurers are focusing on reinsurance and trade credit by setting up operations in Dubai’s DIFC or Abu Dhabi’s ADGM.
Although M&A activity in the Asia-Pacific region has declined compared to previous years, the slowdown has been less severe than in the US or Europe. Major Japanese insurers continue expanding regionally, with several large cross-border deals bucking the global downward trend.
South Africa’s M&A market has been notably sluggish, largely due to high inflation, rising interest rates, and sluggish economic growth. Political uncertainty ahead of the May 2024 elections has further dampened deal-making.
Specialty insurers, particularly in the property and casualty (P&C) market, are attracting more attention, driven by the growing importance of technology and data integration in M&A strategies.
While deal conditions have been challenging, some top-performing companies have used this time to plan for future growth. As market conditions start to improve, a clearer path for M&A activity is emerging, although recovery will likely vary by region.
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